Six Pixels of Separation - The Blog
January 19, 2008 3:48 PM

How To Make Money By Giving Something Away For Free

This Social Media - Web 2.0 world we've all come to embrace might well be causing some serious business issues that all of us will have to face in the coming years. While there is no economic proof of this, the discussions around whether or not we're heading towards another dot com bubble burst continues to peculate. Personally, I don't think we are facing another bubble burst, but there does have to be some kind of business behind all of this free stuff we're all giving away.

It's nice to know that you can read this Six Pixels of Separation Blog for free (heck, you can even listen my Podcast of the same name each and every week for free as well). Chris Anderson (author of The Long Tail and Editor at Wired Magazine) has titled his book-in-progress, Free, and everyone reading this post probably has a Facebook profile or has done a recent search using Google at no charge.

Everything is free - once you've paid for the hardware and access.

Facebook has a big valuation (some say close to fifteen billion dollars), and when Mark Zuckerberg (founder) was interviewed last week on 60 Minutes (available for your viewing pleasure here: Facebook: The Entire ‘60 Minutes’ Segment), he simply felt like advertising would be the way Facebook will make its money and be able to continue to provide the services it does for free. Google makes their money from those little AdWords (little... right...), so it must be the right way.

Think about that. Most people will tell you that they hate advertising. Most people will tell you that they also expect all of this stuff to be free. So, if this a translation of the old workout saying: "I hate jogging, I just hate not jogging more"? Do people hate advertising, but they would hate paying for some of this stuff more than dealing with the occasional ad?

If that's the case, advertising does not work.

What does work?

Content. Investing in creating content - text, images, audio, video - not only gives Consumers stuff that adds value to their lives, it gives them food for thought. It keeps them engaged for much longer than a 30-second spot and it's a lot easier to remember than that billboard they whizzed by on the freeway. People also, innately, like to talk about stuff they've read, seen or heard. This has been the whole "conversations" thing. Through these digital tubes, we can tell more than the person next door. We can create our own thoughts, memes, themes and get them out there in the world. Through these conversations, we're seeing the initial formation of communities. And while people do question the power and strength of an online, virtual community, there is more and more research showing that people are starting to feel as strongly about their virtual communities as they do about their real-life community (I believe this to be true, because I do feel that strongly about some of my online communities).

The money comes from providing valuable content because people who are following what you're giving them for free are also inclined to follow the theory of reciprocity. It's built into us. For the first few years, e-commerce models were built around providing the lowest price with no fee for shipping. This is shifting as well. Consumers (that would be you and I) are willing to pay a premium online if what we're getting has added value (Threadless doesn't sell the cheapest t-shirts and Zappos doesn't sell the cheapest shoes).

Companies are struggling with whether or not they should be Blogging, Podcasting, taking part in online social networks or building up land in virtual worlds because they're scared of the time and commitment it will take to create content on a consistent and fresh basis. Companies are still begging to see studies on the ROI of Blogging.

What's the ROI on Business Development?

Nothing has changed - except the channels and your ability to have a global voice.

When people ask Avinash Kaushik (Occam's Razor and author of Web Analytics - An Hour A Day) why companies like Google let people use tools like Google Analytics for free, Kaushik replies that it is a "faith-based initiative." By making Website owners smarter, Google has faith that they will spend more on stuff like AdWords, etc...

I see that as a business opportunity, business development and long-term growth. I don't see anything free about it.

By Mitch Joel